Via Capital Economics:
Shipments beat expectations but seasonal distortions muddy the water
• The January trade data were much stronger than anticipated but seasonal volatility caused by annual shifts in the timing of Chinese New Year make it difficult to get a good grip on underlying trends at this time of year. Even if the latest recovery in trade is genuine, the outlook for this year is still downbeat.
• Export growth rebounded from -4.4% y/y in December to 9.1% in US dollar terms last month (the Bloomberg median was -3.3%, our forecast was -6.0%). Import growth also picked up from -7.6% y/y to – 1.5% (Bloomberg -10.2%, CE -15.0%). (See Chart 1.) Chinese New Year fell earlier in February this year, which means that more of the pre-holiday rush to fulfil orders will have fallen into January, boosting export growth. Seasonal factors and base effects for import growth were somewhat less favourable given the strength of inbound shipments a year ago. To try to get a clearer picture of current momentum, we have seasonally adjusted the trade data as best we can. On this basis, exports and imports both picked up last month but remain weaker than a few months ago. (See Chart 2.) For now then, the broad trend in shipments still appears to be pointing down, particularly on the import side.
• Exports to the US remained weak last month, even as shipments to the rest of the world recovered. (See Chart 3.) This suggests that US tariffs have started to become a more meaningful drag on exports. Meanwhile, commodity imports slowed sharply in January. (See Chart 4.) This was largely due to price effects, but volumes softened too. Imports of high-tech products also remained weak, consistent with the theory that a shift in the electronics sector’s inventory cycle is weighing on imports. (See here for details.)
• Looking ahead, the downbeat outlook for global growth means that this year is likely to be challenging for Chinese exporters, even if the ongoing US-China trade negotiations culminate in a deal. Meanwhile, we think cooling domestic demand and easing commodity price inflation will remain a headwind to imports in the near-term.